On Wednesday stocks reacted favorably initially to the quarter pont rate hike from Fed Chair Powell. However the news conference presented a picture of a Fed Chair who seemed confused at times and bumbling at others. Fed Chair Powell cleared his throat several times after a number of questions were asked gave the impression of a Fed Chair unprepared to confront questions regarding the ongoing banking crisis. Powell’s comments of how the banking system was healthy seemed in stark contrast to new after hours of PacWest Bankcorp continuing its collapse. All of this weighed on stocks after 3:00 PM when the conference ended. Volumes rose as stocks fell. Investors tried to hold the selling to the 4100 level and for the most part they did, with the index closing at 4090, but the selling was disappointing.
The Dow Jones fell 270 points while the NASDAQ lost just 55 points closing at 12025.
Let’s review the close on Wednesday to see what to expect for Thu May 4 2023.
Stock Market Outlook Chart Comments At The Close on Wed May 3 2023
The index closed with a bearish candlestick for Thursday. The SPX fell below the 21 day moving average on Wednesday. The Bollinger Bands Squeeze is in full swing and the signals are now pointing to the possibility that stocks may drop lower as the Lower Bollinger Band is turning down while the Upper Bollinger Band is now sideways.
All major moving averages are climbing which is bullish and the 100 day continued to move higher above the 200 day
The S&P chart is bullish for Thursday but with growing signals stocks may move lower.
There are 7 up signal since January and no down signal left in the chart.
Stock Market Outlook review of Wed May 3 2023
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Tue Apr 25 2023. That down signal gained some strength on Wednesday.
- Settings: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9.
Ultimate Oscillator: The Ultimate Oscillator is falling and positive.
- Settings: The Ultimate Oscillator settings are: Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months.
Slow Stochastic: The Slow Stochastic has a down signal in place.
- Settings: For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic tries to predict the market direction further out than just one day.
Relative Strength Index: The RSI signal is falling and negative.
- Settings: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It is often the first indicator to show an overbought or oversold signal.
Rate of Change: The rate of change signal is falling and negative.
- Settings: Rate Of Change is set for a 21 period. This indicator looks back 21 days and compares price action from the past to the present. With the Rate Of Change, prices are rising when signals are positive. Conversely, prices are falling when signals are negative. As an advance rises the Rate Of Change signal should also rise higher, otherwise the rally is suspect. A decline should see the Rate Of Change fall into negative signals. The more negative the signals the stronger the decline.
Support and Resistance Levels To Be Aware Of:
4250 is resistance
4240 is resistance
4225 is resistance
4210 is resistance
4200 is resistance
4190 is resistance
4180 is resistance
4175 is resistance
4150 is resistance
4135 is resistance
4125 is support
4100 is support
4090 is support
4075 is support
4050 is support
4030 is light support
4025 is light support
4000 is support
Stock Market Outlook for Thu May 4 2023
For Thursday the technical indicators are continuing to show further weakness and a chance for the index to close negative on Thursday.
The Fed on Wednesday hosted a very subdued news conference that looked like the Fed was unsure what answers for questions to provide.
On Thursday after the close Apple reports its latest earnings. This is a highly anticipated earnings report.
Potential Economic and Political Market Moving Events
For this week Friday’s April non-farm payroll numbers is the remaining key economic event that will move markets.
Thursday:
8:30 Trade deficit
8:30 Weekly Initial Unemployment Insurance Claims